PF - 6.1 - 6.2

The individual assets contained in an actively managed mutual fund are selected by…

• The pool of investors
• The investor who owns the most shares of the fund
• An automated computer program
• A professional fund manager

Which is the best description of an index fund?

• A mutual fund that tracks the performance of a specific market benchmark
• A retirement fund for employees over age 50
• An index made up exclusively of government bonds
• A safe investment product that guarantees a high rate of return

One downside of active investing is that…

• You must have a license, certification, or college degree to make these types of investments
• You must buy and sell each day in order for it to work correctly
• You are paying a fund manager who charges fees that will eat into your potential returns
• You cannot diversify your portfolio using this strategy

All of the following are true about target date funds (TDFs), EXCEPT…

• TDFs automatically reallocate your investments over time
• TDFs are a good investment option for hands-off investors
• TDFs track the performance of a particular market index
• TDFs are invested in primarily in stocks when the target date is far in the future

How is an exchange traded fund (ETF) different from a mutual fund?

• An ETF can be traded throughout the day and bought from other investors, like a stock
• An ETF can only be bought at the end of the day from the fund provider
• An ETF is usually actively traded and has higher expense ratios
• An ETF is a pooled investment that uses funds from many different investors

What is a robo-advisor?

• A security algorithm used by some fund managers to protect your investments
• An investment management service that uses a computer program to manage assets
• A financial manager who provides specialized advice about technology funds
• A popular type of exchange traded fund (ETF) with a low minimum investment

1. The S&P 500 is…

• 1. An actively managed mutual fund

• 1. A diverse collection of stocks and bonds

• 1. An index of the  500 largest publicly-traded companies in the world

• 1. An index of the 500 largest publicly-traded companies in the US

2. All of the following are true about robo-advisors, EXCEPT…

• 1. Robo-advisors generally have lower fees than a traditional financial advisor

• 1. Robo-advisors generally have a higher account minimum than a traditional financial advisor

• 1. Robo-advisors use an algorithm to automate the investing process

• 1. Robo-advisors generally invest your portfolio based on your goals and risk tolerance

3. Alberto has decided to invest his retirement money into a mutual fund filled with mid-sized US companies. The fund manager is…

• 1. A CEO at one of those midsize companies

• 1. The person who selects which stocks to include in the fund

• 1. The website where Alberto logs in to check his fund’s value

• 1. The budgeting software Alberto uses to make sure he has enough saved every month

5. Alma recently started investing in a target-date fund with a planned retirement date that is 38 years in the future. How is the portfolio in her TDF most likely allocated?

• 1. Majority stocks and a small percentage of bonds

• 1. Half stocks and half bonds

• 1. Majority bonds and a small percentage of stocks

• 1. Her TDF allocation will depend on the specific securities she selects